understanding the nonmanufacturer rule (nmr) u.s. small business administration office of government...
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UNDERSTANDING THE NONMANUFACTURER RULE(NMR)
U.S. Small Business Administration
Office of Government Contracting
FY 2014
The Nonmanufacturer Rule Program
Applies to firms that receive supply contracts, above $25,000, under the 8(a) program or on a small business set aside, who can be either a manufacturer or a nonmanufacturer of a product;
A nonmanufacturer who receives one of these contracts must agree to supply the product of a domestic small manufacturer or processor;
SBA can waive this requirement;
Once a waiver of the manufacturer rule is approved, a firm may supply the product of a large manufacturer.
Overview•Key Definitions•Regulations, Laws•Applicability•Waivers•Best Practices
Definitions
•Manufacturer•Nonmanufacturer•Kit Assembler•Reseller•Wholesaler
Who is a Manufacturer?
A manufacturer is a concern which, with its
own facilities, performs primary activities in
transforming inorganic or organic
substances, including the assembly of
parts and components, into the end item
being acquired.
Who is a Nonmanufacturer?A concern may qualify as a small business
nonmanufacturer if:
• Less than 500 employees;
• Primarily engaged in retail or wholesale and normally sells type of product being supplied;
• Takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and
• Will supply the end product of a small business manufacturer or processor made in U.S. or obtain waiver to non-manufacturer rule
Who is a Kit Assembler?When the manufactured item being acquired is a
kit of supplies, or other goods provided an offeror for a special purpose, the offeror cannot exceed 500 employees, and 50 percent of the total value of the components of the kit must be a small business under the size standards for the NAICS codes of the components being assembled.
The offeror doesn’t need to be the manufacturer of any items assembled
Who is a Retailer? Wholesaler?
Retailer -- a person who is authorized to sell someone else’s goods and/or services
Wholesaler -- An intermediary (go-between) which sells to other intermediaries, such as a firm that buys from a manufacturer and sells to a retailer
Regulatory Requirements
The regulations that govern the NMR:
Federal Acquisition Regulation (FAR) Part 19› FAR 19.001 et seq. - Definitions› FAR 19.102 Size Standards› FAR 52.219-1(a)(3) - Provision
Code of Federal Regulations (CFR) 13 CFR› 13 CFR § 121.406 – The Rule › 13 CFR § 121.1202 et seq. - Waivers› 13 CFR § 125.15 – SDVO Set-Asides› 13 CFR § 127.505 – WOSB Set - Asides
Summary of CFR regulations
• SBA size regulations 13 CFR 121.103(h)
• HUBZone regulations 13 CFR 126.616
• SBA Certificate of Competency 13 CFR 125.5
• Service-disabled veteran 13 CFR 125.15(b)
• 8(a) and SDB regulations 13 CFR 124.513
• Small disadvantaged business 13 CFR 124.1002(f)
• WOSB Program 13 CFR 127
• SBA Prime Contracting 13 CFR125.2
• SBA Subcontracting 13 CFR125.3
Below the SAT
Small business set asides are mandatory for the acquisition of supplies and services valued from $3,000 to $150,000
FAR permits but does not require the reservation of an award of a contract with a value less than the SAT to different types of small businesses such as 8(a), HUBZone, WOSB, SDVO SBCs
Interaction of Small Business Programs
Above the SAT
• SBA’s regulations provide for parity among certain small business programs
• KO will determine which set-aside program to use
Interaction of Small Business Programs
Analysis: Regulatory Applications
Applicability of the NMR
• Small business set-asides on supply contracts, orders, BPAs over $25k
• The NMR will be applied when a small business nonmanufacturer will provide the end item of:• a small business manufacturer• an other than small business manufacturer under a waiver
(an existing class waiver or individual –or solicitation specific-waiver)
• Does not apply to full and open solicitations
When the NMR does NOT apply
There are NO waivers to the NMR for:
Service or construction contracts
HUBZone Contracts
NAICS codes outside of sector 31-33, Manufacturing
Choosing NAICS CodesThe North American Industry Classification System
(NAICS) code chosen must be that which best describes the principal purpose of the product or service being acquired
Procurements for supplies must be classified under the appropriate manufacturing NAICS code, NOT under the wholesale or retail trade NAICS code. 13 C.F.R. § 121.402(b)
SECTORS 42, 44 and 45 ARE NOT TO BE USED FOR GOVERNMENT PROCUREMENT OF SUPPLIES
Applying NAICS Codes to Acquisitions
The KO designates the size standard of the procurement by selecting the size standard in effect on the date the solicitation is issued.
The basis for designation NAICS that best describes the goods or services that are going to be procured.
SBA's size regulations pertaining to federal procurement are also found in the Federal Acquisition Regulation, 48 CFR part 19.
To bid on a federal contract, a concern must self-certify that it is a small business under the appropriate size standard in the solicitation.
Applicable Size Standards-NMR
A small business nonmanufacturer must meet size standards that apply to acquisitions covered by the NMR.A small business nonmanufacturer (500 or less
employees) will provide the end item of: a small business manufacturer (as regulated by SBA’s Table of
Size Standards 13 C.F.R. § 121 whether the size standard is 500 employees or not)
an other than small business manufacturer under a waiver
The size standard for a nonmanufacturer is 500 or less employees. In any case, a small business nonmanufacturer cannot exceed 500 employees.
Waivers to the NMRTwo types of waivers
Class Waiver
Individual Waiver
Class Waivers to the NMRA class waiver applies to all items in a class of products.
Class waivers apply to categories of items and continue in effect unless revoked by SBA.
A waiver of the NMR for classes of products has no time limitation or duration.
Any government agency, business association, or interested party may request a waiver for a class of products.
Discovery of even one small business manufacturer for a single item in the class will justify denial of a request for a class waiver.
Four steps in checking “NMR” class waivers
1. NAICS code
2. Product description
3. Product service code at http://www.acquisition.gov/
4. Federal Register, where SBA communicates “NMR” changes
Individual Waivers to the NMRSBA will consider granting in individual waiver when a KO
determines no small business manufacturers exist to meet requirement
The waiver to the NMR on an individual procurement is provided for in Section 8(a)(17) of the Small Business Act.
An individual waiver is narrowly applied to select contract line item numbers (CLINS) for a specific solicitation.
A NMR Waiver must be in place prior to receipt of offers in order for a nonmanufacturer to qualify as a small business for set-aside purposes.
How to Obtain an Individual Waiver
• 13 C.F.R. 121.406 and 121.1202 - 1204
• www.sba.gov
• The basis of granting an individual waiver rests on the market research presented with an agency’s request to justify the claim that no small business manufacturers exist that can meet the procurement requirements
What to Submit• Using an SBA NMR request template, submit the following:• NMR request on Agency letterhead, signed by a KO
• Include elements of SBA’s requirements (FAR has limited guidance)
• Market Research report or memo as an attachment• Market research should be based on search for SB manufacturers
using the NAICS code for the solicitaion
• Supporting documentation or copies of:• FBO Sources Sought / RFI / Vendor Survey including a summary of
findings• Brand Name Justification for brand name items• DSBS search results (don’t search for name brands, use generic terms
and remember to search on the NAICS code used for the solicitation)• Internet searches (Google, Thomasnet.com, etc.)
What to Submit, cont.
• List of items to be waived – provide specific information including multiple item requests
• Statement of Work is REQUIRED on contracts expected to exceed a total estimated value of $500,000
• Any other documents that you think would help in the analysis and determination that no small business can produce the end product
Identification of Small Business Sources on Multiple Item Request for a Single Solicitation (Individual Waiver)
• Each line item must identify whether the end product will be supplied by a small business manufacturer• CLINs• NSNs• SINs
• One waiver per solicitation
How to Submit
• Submit NMR waiver requests and attachments to the NMR program email address at: [email protected]
• Use the solicitation number and agency abbreviation in the subject line – ex: SBA SBA123-14-Q-0001 Waiver Request
Analysis: Review for Completeness• Regulatory vs Program Requirements• Use the NMR Waiver Request template as a guide
Minimum Required DocumentsMinimum Required Documents NMR Request PackageNMR Request Package
Excellent “NMR” reference with size standard
You have a Waiver, Now What?
Excellent “NMR” reference with “LOS”
You have a Waiver, Now What?
Oops. Incorrect “4” NAICS code used
FBO Notices
Does the class waiver to the “NMR” apply?
Are they looking for resellers or dealers?
Class Waivers to the NMR
Market Research Recommendations
SBA’s Dynamic Small Business Search http://dsbs.sba.gov
FedBizOpps – Sources Sought results
Summary of event results, i.e. “Industry Day” etc.
Online product information
Acquisition history
SBA Procurement Center Representative (PCR)
FAR Part 10
Best Practices Plan ahead
Solid market research with supporting documentation
Communicate to contractors how the NMR is applicable to solicitations (FBO listings, etc.)
Communicate with the small business office to identify small business goaling needs or opportunities
Work with an SBA PCR - Small Business Coordination Record (Form DD 2579)
Use the right NAICS code for procurement of supplies
Questions?Nonmanufacturer Rule Program
Amy Garcia
Office of Contract Assistance
Office of Government Contracting
U.S. Small Business Administration
Washington, D.C.
202/205-6842